In many banking systems throughout the world, bank deposits of individual depositors are insured by government-run deposit insurance programs up to an established deposit insurance limit. In the United States, for example, the current deposit insurance limit is generally $100,000 per individual account in any one bank. A similar insurance limit for credit union accounts is also in effect for deposits in United States credit unions.
Depositors wishing to have government-backed insured funds on large bank deposits in excess of the established insurance limit have limited options. A depositor can choose to open multiple accounts in separate banks, each account being maintained at an amount up to the established insurance limit. This process is time-consuming and administratively cumbersome. Alternatively, a depositor can place a large deposit in an amount that is a multiple of the established insurance limit in a banking company having a plurality of wholly owned subsidiary banks to which portions of the large bank deposit may be assigned. In the United States, such multi-account deposit services are currently offered by only a few financial institutions, such as Citigroup, Merrill Lynch and Fishback Financial Corporation. Thus, competition is limited and, for the vast majority of depositors, there is no opportunity to obtain such a service from a local community bank. Additionally, a depositor (or the bank at which the deposit is to be placed) can purchase deposit insurance from a private insurance company. But such insurance is expensive and raises concern as to whether the private insurance company is able to satisfy its obligations in the event of a banking system failure.
The growth of bank core deposits has failed to keep pace with loan and asset growth, particularly in community banks. As a result, banks have turned to alternative funding sources, such as Federal Home Loan Bank (FHLB) advances, wholesale funding and brokered deposits. These alternative funding sources are both more expensive and volatile than traditional core deposits, causing the net interest margins of the banks to be reduced and subjecting the banks to increased risk.
While the relative amount of insured bank deposits has declined, the demand for large denomination risk-free investment products has remained strong. However, recent Federal government budget surpluses have reduced the amount of outstanding U.S. Government bonds, notes and bills (collectively, Treasuries) available to investors. What is needed is a method and apparatus for processing large bank deposits to help banks attract new depositors looking to invest large amounts of funds in a fully insured credit risk-free investment vehicle.